15% Guaranteed Returns - Buy both Call & Put options Strategy

[DSM]

Well said Dan.

The mental maths and envisioning different scenarios for option trading is not known to most traders. There are three kind of views regards to Options -

Options are dangerous/difficult, and you can loose your shirt - so avoid.
Options are easy - One can sell OTM calls/puts - its easy money. Let's 'eat premium' a common term used by traders many of who don't know what they are doing.
The third - Know the maths and adjustments required to trade options and they do it professionally.

BTW, though interested, I have little knowledge of options, and only use it to take a directional view.

Hi

After seeing all the post's in this thread I felt is time to do something against the general public view against this sort of option trading.

It is all about trade and risk management and math. We can trade long straddles and strangles and we can trade short straddles and strangles. How? By knowing what we are doing and how we have to manage our risk. Telling that this is out of question, even laughing about it, shows the lack of knowledge in dept about this kind of option trading. I agree that average Joe is not able to handle that risk, as knowledge is missing. But there are others which have that knowledge and make huge money with it.

Take care / DanPickUp

 

[hector777]

Hi people ,

Just joined the forum today ... ... Damn good site i should say .... very informative ....

Btw here goes my first Post / Query

Today the Market opening up with almost a 75 points gain and closed with 75 points on nifty ... but the call options on nifty hardly went up accordingly ..... i had a 6400 call option .... it closed lower than yesterday closing !!!! .... But the Put options of nifty saw a proportionally fall ... as expected ... My question is ... how come the nifty call options did not increase proportionally. whats the logic ??? ... Please advice ...

 

[anup]

Hi people ,

Just joined the forum today ... ... Damn good site i should say .... very informative ....

Btw here goes my first Post / Query

Today the Market opening up with almost a 75 points gain and closed with 75 points on nifty ... but the call options on nifty hardly went up accordingly ..... i had a 6400 call option .... it closed lower than yesterday closing !!!! .... But the Put options of nifty saw a proportionally fall ... as expected ... My question is ... how come the nifty call options did not increase proportionally. whats the logic ??? ... Please advice ...

Read about Implied volatility

 

[DanPickUp]

Well said Dan.

The mental maths and envisioning different scenarios for option trading is not known to most traders. There are three kind of views regards to Options -

Options are dangerous/difficult, and you can loose your shirt - so avoid.
Options are easy - One can sell OTM calls/puts - its easy money. Let's 'eat premium' a common term used by traders many of who don't know what they are doing.
The third - Know the maths and adjustments required to trade options and they do it professionally.

BTW, though interested, I have little knowledge of options, and only use it to take a directional view.

Well, as you not even trade such strategies, how comes that you even use the words: Well said ?? :lol:

As you told: The mental maths, what do you mean with that??

Did I talk at any time about mental math in any of my post or what do you mean with that????

Well, if there are only three kind of option traders, so what about one out of the box you mentioned???

As you not even know how those one trade, how those it come that you put your self in a situation to value about them????

Take care my friend and watch what you post / DanPickUp

 

[optionwriter]

correct but PT if you sell credit spread ( OTM ) the risk is much reduced.

CREDIT SPREAD ALSO RISKS ,BUT RIGHT, RISK IS REDUCED MEANS LOSS IS SMALL ..
but u need to wait make a small profit /loss till expiry...
or if u square off position in between expiry , maybe in loose..
but know where to exit... it's important in option hedging..:thumb:


happy trading...

 

[DSM]

Dan, Not getting into debate, but have read some of your post, read thru some books on options and also attended two day course on options conducted by the Bombay Stock Exchange. Inspite of this, I said I know very little about options. Not judging anybody, but have many post here from traders who think selling 'OTM options' is easy way to make money as 90% of options expire worthless.... according to me that is lazy thinking, and I know trading options requires deeper thinking - and flexibility to change one's position to trade as per different situations and risk scenarios. And it is definitely more than 'eating premium'

I guess you must be knowing about one of the big options trader - Victor Niederhoffer, once a partner with George Soros, and even managed his funds. He published books and academic papers... had a hedge fund which was ranked at one time no. 1 in the world. George Soros held him in such high regard, that he sent his son to learn trading from him... What was his strategy? 'Eating premium' by selling OTM calls and puts. One fine day, when the DOW dropped 7% (reasons not important - black swans can happen, which is why most options expire worthless - as it is insurance against such risk), he lost not only what he had earned all his lifetime, but was bankrupt and had to sell his house and silverware.... And the exclusive clubs that he used to visit, people would laugh behind his back he said. So if a famed fund manager, a trader highly regarded by George Soros, a author of a book and research papers who has traded more than 2 million contracts goes bankrupt, what does one say of the strategy of 'eating premium' JUST MY VIEWS ON TRADERS LOOKING FOR A QUICK BUCK WITHOUT UNDERSTANDING RISK. Take care and have a good weekend.

Well, as you not even trade such strategies, how comes that you even use the words: Well said ?? :lol:

As you told: The mental maths, what do you mean with that??

Did I talk at any time about mental math in any of my post or what do you mean with that????

Well, if there are only three kind of option traders, so what about one out of the box you mentioned???

As you not even know how those one trade, how those it come that you put your self in a situation to value about them????

Take care my friend and watch what you post / DanPickUp

 

[healthraj]

In the October Series, since the market was going UP, and the INDIAVIX dropping to normal levels and the IVs dropping from 30 to 22 Levels, the Credit Spreads have been profitable and the Debit Spreads have been useless. I have been carrying debit spreads and I know what I am talking. So to make these Debit Spreads profitable, I had take some risk and close the CE at the TOP of the Range and close the PE at the Bottom of the Range.

Just to give an example Bought 5700PE-6200CE at around 120, when the market was around 5950. NIFTY moved UP by 150 points. Normally in those conditions, you would expect the pair to give at least 25% profit. But since the AVG IV dropped from 33% to 22%, the pair is now trading at 105.

So there is no guaranteed return for Spreads. Although one General Observation, which is also not a General rule.

When the Market is GOING UP and if it is not a REAL BULL (Not Real Bull the IVs are coming down. In a Real Bull the Call IVs will be going UP because people want to buy CEs at higher premium), then Credit spreads work better (INDIAVIX going down also helps).

When the Market goes DOWN, in most of the cases, the IV goes UP and so it should help Debit Spreads.

So now the problem is to find what is Real BULL or BEAR :thumb:

 

[Cubt]

I guess you must be knowing about one of the big options trader - Victor Niederhoffer, once a partner with George Soros, and even managed his funds. He published books and academic papers... had a hedge fund which was ranked at one time no. 1 in the world. George Soros held him in such high regard, that he sent his son to learn trading from him... What was his strategy? 'Eating premium' by selling OTM calls and puts. One fine day, when the DOW dropped 7% (reasons not important - black swans can happen, which is why most options expire worthless - as it is insurance against such risk), he lost not only what he had earned all his lifetime, but was bankrupt and had to sell his house and silverware.... And the exclusive clubs that he used to visit, people would laugh behind his back he said. So if a famed fund manager, a trader highly regarded by George Soros, a author of a book and research papers who has traded more than 2 million contracts goes bankrupt, what does one say of the strategy of 'eating premium' JUST MY VIEWS ON TRADERS LOOKING FOR A QUICK BUCK WITHOUT UNDERSTANDING RISK. Take care and have a good weekend.

Thanks for sharing it, you made me realize that I need to look at my own signature twice before placing any trade. After all I strongly believe money management/proper position size is the only Holy grail that everyone knows but only few acknowledge it.

Even after learning about IV, knowing infy's high volt, I still bet against it. With wrong calculation bet a huge stake n lost my per annum salary in just 1 day that infosys offered me when I was fresher.

I opened this thread out of ignorance not knowing much about options,its just bcoz 2 to 3 long strangle trades I made resulted in profit. Thats a complete stupidity, realizing it now after paying a huge tution fee to markets.

So my point is irrespective of any strategy, with whatever expert knowledge we have, if its done with bad position size then we will come back to where we started in just 1 day.

 

[optionwriter]

Thanks for sharing it, you made me realize that I need to look at my own signature twice before placing any trade. After all I strongly believe money management/proper position size is the only Holy grail that everyone knows but only few acknowledge it.

Even after learning about IV, knowing infy's high volt, I still bet against it. With wrong calculation bet a huge stake n lost my per annum salary in just 1 day that infosys offered me when I was fresher.

I opened this thread out of ignorance not knowing much about options,its just bcoz 2 to 3 long strangle trades I made resulted in profit. Thats a complete stupidity, realizing it now after paying a huge tution fee to markets.

So my point is irrespective of any strategy, with whatever expert knowledge we have, if its done with bad position size then we will come back to where we started in just 1 day.

absolutely right dear cubt..
most of the new trader comes to trading without basic knowledge and they don't want to spend time/money to learn..
but they r ready to give huge amount to market for learning and if learned it's better nor away form market and said it's gamble...

s, option have basic 18 strategies and every strategy gives reasonable profit but all strategy not work in single mode...
so we need to find which strategy works in that period ...
in NSE & most of the world exchanges , total traded volume in "option trading" .
in NSE ,63% + traded in option trading..(here one member notified it clearly)

so don't loose ur hard work..

happy trading...

 

[DanPickUp]

Dan, Not getting into debate, but have read some of your post, read thru some books on options and also attended two day course on options conducted by the Bombay Stock Exchange. Inspite of this, I said I know very little about options. Not judging anybody, but have many post here from traders who think selling 'OTM options' is easy way to make money as 90% of options expire worthless.... according to me that is lazy thinking, and I know trading options requires deeper thinking - and flexibility to change one's position to trade as per different situations and risk scenarios. And it is definitely more than 'eating premium'

I guess you must be knowing about one of the big options trader - Victor Niederhoffer, once a partner with George Soros, and even managed his funds. He published books and academic papers... had a hedge fund which was ranked at one time no. 1 in the world. George Soros held him in such high regard, that he sent his son to learn trading from him... What was his strategy? 'Eating premium' by selling OTM calls and puts. One fine day, when the DOW dropped 7% (reasons not important - black swans can happen, which is why most options expire worthless - as it is insurance against such risk), he lost not only what he had earned all his lifetime, but was bankrupt and had to sell his house and silverware.... And the exclusive clubs that he used to visit, people would laugh behind his back he said. So if a famed fund manager, a trader highly regarded by George Soros, a author of a book and research papers who has traded more than 2 million contracts goes bankrupt, what does one say of the strategy of 'eating premium' JUST MY VIEWS ON TRADERS LOOKING FOR A QUICK BUCK WITHOUT UNDERSTANDING RISK. Take care and have a good weekend.

@DSM

Don't worry, no debate, just pushing legs. You should know me. Now on a serious note: Have a look at the following: https://www.youtube.com/watch?v=BquDGE9KxZQ . She is also managing risk in a proper way and also makes really money with it. She also faced so called black swan events with exactly that kind of trading, but did the right adjustments. So the guy you mentioned above was not able to handle what he did, but that those not mean that others not can do it.

Take care and also enjoy your weekend / DanPickUp